DM Digest 18

DIGEST

18

SEE WHAT’S NEW AND NOTEWORTHY IN PRIVATE EQUITY THIS WEEK /// ISSUE 18

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PE Fundraising in Emerging Markets Rebounds

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Institutional Investors Target PE

Social Networking M&A

• Facebook plans to acquire 20 companies this year

Dearth of Distressed Debt in Europe • EU sellers are holding up

Blackstone’s Mega Healthcare Buyout • Emdeon deal totals USD 3billion

• Transparency and risk management in demand

Bob Geldof PE Fund Nears First Close • African fund close to USD 200 mln raised

Earlybird Argues for European VC • Attractive exit multiples

Quote of the Week

• Africa seen as future star of PE

September 01, 2011

PE FUNDRAISING IN EMERGING MARKETS REBOUNDS Funds targeting emerging markets are poised to double this year compared to last year, according to the latest research published by Emerging Markets Private Equity Association (EMPEA). Fund managers raised USD 22.6 billion in the first half of this year, versus USD 23.5 billion raised in all of 2010, putting emerging markets on track to potentially double 2010 fundraising totals. Deal volumes held steady to mid-year. China leads fundraising to date. Its share of the fundraising total rose to 45 percent, its highest level to date. Investments took place across 54 countries in the first half, including frontier markets such as Honduras, Laos, Madagascar, Mongolia and Uruguay. Globally, the largest number of emerging market private equity deals were done in the industrials and manufacturing sector, followed by the consumer, services and technology sectors.

FACEBOOK POISED TO DOUBLE M&A Facebook is planning acquisitions that it hopes will improve the social network’s site design, improve reliability and support advanced mobile access, reports BusinessWeek. The M&A drive is meant to make Facebook more competitive with other big names in Internet technology, such as Google Inc. and Twitter Inc. The company aims to make about 20 purchases in 2011, up from 10 last year and one in 2009, according to Vaughan Smith, Facebook’s director of corporate development.

DEARTH OF DISTRESSED DEBT IN EUROPE Hedge funds and private equity firms that have raised money to buy assets from European sellers negatively affected by the sovereign debt crisis are waiting for lower prices for assets, according to BusinessWeek. It seems that banks have little incentive to offload bad loans because selling them at a discount would trigger losses. Low interest rates from the European Central Bank are enabling indebted companies to meet their payments schedules, keeping the default rate in Europe at an historic low. But hedge funds and private equity firms expect the pace of transactions to pick up once interest rates begin to rise, according to the report which dubs distressed debt investors as “vultures”.

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BLACKSTONE IN MEGA HEALTHCARE BUYOUT AND TAKE PRIVATE The largest deal this week is probably Blackstone Group’s acquisition of Emdeon Inc. for about USD 3 billion. According to Bloomberg, Blackstone plans to take the provider of healthcare industry billing solutions private. Emdeon’s two biggest shareholders, private-equity firms Hellman & Friedman and General Atlantic, have agreed to the acquisition, and will maintain a “significant minority equity interest” in the company.

INSTITUTIONAL INVESTORS’ VIEW OF PE OPTIMISTIC BUT DEMANDING A new study by SEIC, a provider of services . and solutions for the financial service industry, reveals that poor returns projected for many asset classes, is causing institutional investors to turn to PE as a source of returns.

But they are demanding greater transparency, reporting and risk management from PE fund managers before they invest their capital.

According to the executives surveyed, the PE industry still faces three challenges: • Overhang of uninvested capital.

• Climbing valuations.

• Backlog of portfolio companies.

BOB GELDOF’S AFRICAN PE FUND NEARS FIRST CLOSE PE’s use of celebrities and former politicians is a strategy that seems to work. Bob Geldof, former pop star and social activist, is getting lots of press during fundraising for a new African consumer goods sector fund called “8 Miles”, a reference to how close Europe and North Africa really are. It is nearing a USD 200mln first close, reports Reuters. Geldof says that six out of ten fastest-growing economies are African. Demographics and natural resources also contribute to the investment case.

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EARLYBIRD ARGUES FOR EUROPEAN VC In a graphically rich and straightforward presentation, a German early stage venture capital fund argues in slideshare that European VC is actually outpunching US venture capital when measured by return multiples and efficiency of capital deployed. Earlybird Ventures says return multiples of greater than 5X are more common in Europe than they are in the US, even if the exit valuations are 25 percent lower. Furthermore, it says that based on VentureSource data, European VC has returned some USD15 billion to LPs in the past 24 months.

That figure is equal to 50 percent of the USD 30 billion in US Venture-backed liquidity events in 2009 & 2010 (Thomson Reuters), yet European VC used only one fifth the venture capital that the US firms used to achieve the same liquidity events, says Earlybird.

QUOTE OF THE WEEK

“So whether you like it or not, and you can ask me all the questions you want. Just on that one single fact. If your family is going to stay alive with food in the future, Dude, it’s going to be Africa. ” Who said it: Bob Geldof, rock star, Live Aid founder, and private equity fund partner Context: Bob Geldof was interviewed by a journalist for CASH TV on the sidelines of an investor conference hosted by Bank Julius Bär in Zurich this week. In our quote, he is referring to the fact that sixty percent of the world’s remaining arable land is in Africa and that its raw materials and exports are important to most of the world’s largest economies. Geldof is currently raising a one billion dollar private equity fund, targeting African consumer goods businesses.

Where we found it : Cash .

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Editor: Valerie Thompson, Zurich

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